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As if the home buyer doesn’t have a large enough expense that brings other heavy monthly mortgage payments, you can still find other fees attached on the overall cost which sometimes include a Private Mortgage Insurance (PMI) in cases of those who fell, victim. Before thinking of buying a home you must have saved more than enough budget to go over the 20% down payment and free you from the worries of the PM. In case you can’t afford that amount, it’s obvious your lender will force you towards securing a Private Mortgage Insurance after signing off on the loan in case you are going for a conventional mortgage loan.

If you can successfully come up with a down payment worth 20% of the property’s appraised value or purchased price, you won’t need to worry about the PMI. It is generally not easy for most borrowers to come up with a 20% down payment on their properties most especially as house prices continue to go higher and combined with life’s additional expenses. If you can’t afford the 20% down payment, it’s obvious the PMI fees will be added to your mortgage value.

The PMI was created for the benefit of the lender and not the borrower. It helps the lender gets their money back when you fall out of payment. The PMI might sound like a perfect way of buying a house without having to come up with the high down payment amount. It might be the only options for some like the first time home buyers. However, there are a handful of reasons you need to stay off the reach of a PMI.

I will talk on a few reasons you should by every means avoid a Private Mortgage Insurance (PMI)

  • Cost: More like other insurance policy options, the PMI comes with a premium that needs payment. The less you put on down payment, the higher the PMI fees will be. Such PMI fees are known to vary between 0.3% to 1.5% of the original mortgage amount per year which highly depends on your down payment amount and credit score. This implies for a property that worth $400,000, you’ll be left paying over $333 per month or $4000 per year for a mortgage for a 1% PMI rate. That’s a large sum of money!
  • Not tax deductible: Every homeowner is offered the benefit of deducting mortgage interest rates if deductions were itemized while filing your tax returns. The PMI premiums are the only things you can’t deduct from your taxes regardless of how you file your taxes.


  • Giving money away: Homebuyers who would out less than 20% of the property’s sales price will have to go in for the PMI until the home has a total equity of 20%. The process could last for years which amount to a huge sum of money literally giving away.

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